Rédaction Africa Links 24 with Daily Maverick
Published on 2024-03-04 17:00:58
Aspen Pharmacare, a multinational pharmaceutical manufacturer, is set to experience significant organic growth following a strategic change in its manufacturing agreements. By transitioning to a toll contract manufacturing arrangement for the supply of heparin-based syringes, Aspen will reduce its investment in heparin inventory and increase operating cash flows for the current and upcoming financial years. In the first six months of 2024, Aspen reduced its investment in heparin inventory by R1 billion, with an additional reduction of R2 billion expected by the end of June.
The decision to switch to a toll manufacturing agreement was prompted by concerns over the supply chain vulnerability of the active ingredient for Heparin, sourced from pig intestines. Outbreaks of swine flu and African swine fever led to a major recall of the injectable anticoagulant by regulatory bodies in the US, Europe, Australia, and New Zealand. By shifting to a toll manufacturing model, Aspen’s customers will own and source the active ingredient, while Aspen will handle the manufacturing process. This move is expected to eliminate the strain on Aspen’s bottom line and create a working capital-light model, as described by Sean Capazorio, the group finance officer.
Additionally, Aspen concluded a significant agreement with Sandoz in the first half of the year, acquiring the Sandoz business in China. This deal, for a net upfront consideration of €27.9 million with potential net milestone payments, is expected to receive competition authority approval in May. The agreement is anticipated to offset the negative impact of volume-based procurement on Aspen’s existing China business starting next year.
Stephen Saad, Aspen’s group chief executive, highlighted the company’s progress in reaching the commercialization stage for the manufacture of mRNA platform products, which is projected to contribute to revenue growth in the second half of the year. The company reported a 10% increase in revenue to R21.1 billion, with operating cash flow per share rising by 44% to 553.2 cents. Aspen’s outlook for the second half of the year appears promising, driven by distribution and promotion agreements with Lilly for sub-Saharan Africa and with Viatris for Latin America.
In a separate development, First National Bank (FNB) revealed a substantial hit of nearly R1 billion in the current financial year due to fee reductions. The bank experienced below-inflation fee increases across retail and commercial accounts, in addition to reducing fees on instant payments. FNB absorbed the impact of fee repricing related to real-time payments, resulting in a cumulative reduction of R477 million in customer fees in the first six months of the financial year.
Despite the challenging macroeconomic environment, FNB reported solid growth in its commercial segment, with advances increasing by 10%. Normalized earnings rose by 6% to R19.1 billion, supported by strong net interest income growth from advances and deposits reaching R1.6 trillion. The credit loss ratio of 0.83% was particularly commendable, as it stayed below the group’s through-the-cycle range.
Looking ahead, FNB anticipates softer overall advances growth in the second half of the year, amid persistent high interest rates and inflation. The bank expects earnings momentum to continue in the second half, with shareholders set to receive an interim dividend of 200 cents per share. Despite ongoing economic challenges, both Aspen Pharmacare and First National Bank remain poised for growth and resilience in their respective sectors.
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